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Corn:

March corn lost 0.50 cents on volume of 243,626 contracts. Although volume was below that of January 22 when the March contract gained 3.25 cents on volume of 268,229 contracts and total open interest declined by 2,458, total open interest declined by a massive 13,836 contracts on January 25. Relative to volume, this is approximately 120% above average.

This is the second time during the past three days that total open interest declined by a substantial amount. On January 21 when the March contract lost 1.75 cents on volume of 422,638 contracts, total open interest declined by 12,577. Despite the large decline of open interest on January 25, the impact on prices was negligible. As this report is being compiled on January 26, the March contract is trading 0.75 cents above yesterday’s close and is made a daily high of 3.71 3/4, which is below yesterday’s high for the move of 3.72 1/2.

As we have pointed out in previous reports, ever since generating a short-term buy signal on January 19, corn has traded sideways to higher. From the seasonal point of view, February is one of the strongest months of the year for corn, but there needs to be a catalyst to send prices substantially higher from here. Short sellers are complacent, and new buyers seem to be on the sidelines. We have no recommendation.

Soybeans:

March soybeans advanced 4.00 cents on volume of 184,678 contracts. Total open interest increased by 1,370 contracts, which relative to volume is approximately 60% below average. The March contract accounted for loss of 2,189 of open interest, which means there were sufficient open interest increases in the forward months to offset the decline in March and increase total open interest.

Open interest action relative to price during the past couple of days has been mixed: some good some bad, and like corn, soybeans need a catalyst to move substantially higher. However, it appears likely that the soybean oil contract will generate a short-term buy signal in tomorrow’s trading, which will support higher bean prices. Like corn, February is a positive month for price-performance in the soybean complex. As this report is being compiled on January 26, the March contract is trading 2.00 cents lower and has made a daily high of 8. 82 1/2, which is slightly above yesterday’s print of 8.82. We have no recommendation.

Soybean oil:

March soybean oil lost 6 points on light volume of 78,513 contracts. Total open interest declined by 2,149 contracts, which relative to volume is average. The March contract accounted for loss of 3,163 of open interest, May -112, September 2016 -418. As this report is being compiled on January 26, the March contract is trading 33 points higher and has made a new high for the move of 30.82, which is the highest print since 30.80 made on January 4.

The March contract made its contract low of 26.22 on August 24. The low for trading on January 26 is 30.21, which is below OIA’s key pivot point for the generation of a short-term buy signal. For the March contract to generate a short-term buy signal, the low of the day must be above OIA’s key pivot point for January 26 of 30.42. We have no recommendation.

Chicago wheat:

March Chicago wheat advanced 6.00 cents on volume of 99,282 contracts. Total open interest declined by 4,005 contracts, which relative to volume is approximately 55% above average. The March contract accounted for loss of 7,293 of open interest. As this report is being compiled on January 26, the March contract is trading 6.50 cents higher and trading at the high of the day (4.88 1/2), which is the highest print since 4.91 made on December 21.

According to the latest COT report, managed money is heavily short Chicago wheat by over a 2 to 1 ratio. This means that there is plenty of fuel for a move higher if Chicago wheat generates a short-term buy signal. Although, the March contract has come close to generating a short-term buy signal on January 26, the low of the day on January 26 is for 4.78 and OIA’s key pivot point for the generation of a short-term buy signal is 4.78 1/2. The low of the day must be above the pivot point for the generation of a buy signal. We have no recommendation.

WTI crude oil:

March WTI crude oil lost $1.85 on volume of 1,066,356 contracts. Volume shrank from January 22 when the March contract gained $2.66 on volume of 1,083,597 contracts and total open interest increased by 14,168. On January 25, total open interest increased by 6,988 contracts, which relative to volume is approximately 70% below average. The March contract accounted for loss of 11,126, which means were sufficient open interest increases in the forward months to offset the decline in March and increase total open interest.

Yesterday’s action was bearish, but the market has reversed course on January 26 and currently trading $1.56 above yesterday’s close and has made a daily high of 32.19, which is below yesterday’s print of 32.74. The March contract is quite a way from generating a short-term buy signal, and for a buy signal the daily low must be above OIA’s key pivot point for January 26 of $35.84. The March contract has an average true range (21 days) of $1.86, and therefore the implied high for the move when a short-term buy signal would occur is approximately $37.70 (35.84+1.86 = 37.70), or approximately $5.51 above today’s high. We have no recommendation.

Euro:

The March euro advanced 45 pips on light volume of 107,353 contracts. Total open interest declined just 101 contracts. As this report is being compiled on January 26 the March contract is trading 10 pips above yesterday’s close and has made a daily high of 1.0887, which is above OIA’s pivot point of 1.0856 for the continuation of the downtrend. The euro is trading in a correlated manner with the equity indices on January 26, which is a change of pattern.

Usually, when equities rally, the euro declines. We have been impressed by the euro’s resistance to resuming the downtrend, and although we think there will be a test of the contract low of approximately 1.0490, we think it is quite possible the euro may begin to rally after this test. We have no recommendation.

Silver: On January 26, March silver will generate a short-term buy signal, but remains on an intermediate term sell signal.

March silver advanced 12.2 cents on volume of 46,823 contracts. Total open interest declined by 3,716 contracts, which relative to volume is approximately 215% above average meaning that liquidation was extremely heavy on yesterday’s minor advance. As this report is being compiled on January 26, the March contract is trading 29.1 cents above yesterday’s close and has made a new high for the move of $14.580, which is the highest print since 14.640 made on December 30.

As of today, both gold and silver on short term buy signals, and it has been a substantial period of time since this has occurred. We think the path of least resistance is higher for both precious metals, and the decision by the Federal Reserve regarding interest rates and their comments on the economy in tomorrow’s conference may be the catalyst for higher prices. In summary, if the Fed appears to be increasingly dovish with respect to the economy and interest rates, precious metals may finally get a lift. We have no recommendation at this juncture.

S&P 500 E-mini:

March S&P 500 E-mini lost 29.00 points on light volume of 1,644,551 contracts. Volume shrank substantially from January 22 when the March contract gained 38.25 points on volume of 2,109,763 contracts and total open interest declined by 8,861 contracts. On January 25, total open interest increased by 23,032 contracts, which relative to volume is approximately 40% below average, but an open interest increase on yesterday’s decline confirms the bearish set-up for the E-mini.

However, on January 26 the market has reversed course and is trading sharply higher, up 28.25 points or + 1.51%.We have been advising a stand aside posture in the E-mini due to its oversold condition in the upcoming meeting and conference held by the Federal Reserve. We think today’s rally will carry over into tomorrow and  OIA will take a fresh look at the market after the release of the Fed minutes. For those of you who subscribe to OIA-Direct, please call with any question.

From the January 22 report on the S&P 500 E-mini:

“The Federal Reserve will be meeting this week and on Wednesday will announce the consensus of its members. This may cause equity indices to rally, and we recommend holding off on bearish positions until after the release of the minutes. The March S&P 500 E-mini remain on short and intermediate term sell signals.”